The GBP/USD currency pair remained on the back foot under the 1.3600 level during Europe’s Tuesday session. The pair is still without directional momentum, as traders react to the various global developments affecting market sentiment. The continuing Israel-Iran conflict is grabbing top billing. At the same time, a number of important economic data points are due out, leading market participants to be more cautious and wait before establishing big shorts.
Over the past few trading sessions, GBP/USD has struggled to find momentum after a reprieve. It is still on the defensive, currently trading right under key support at the 1.3600 area. Geopolitical tensions related to the war in Ukraine and domestic economic insecurity are contributing to a go-slow approach. These combined issues are deeply affecting investor sentiment with horror stories abounding.
The dealers have been eyeing new developments in the Israel-Iran war. This unique scenario is profoundly affecting the overall financial markets. This is exacerbated by a myriad of geopolitical issues creating uncertainty and making investors skittish. As such, some GBP/USD observers are opting to take a wait-and-see stance.
This week’s unexpected German ZEW sentiment data. Despite this positive release, this data was unable to galvanize the Euro and the second order effects of that EUR strength have negative implications for GBP/USD. Changes in mood regarding the Eurozone can dramatically affect the pound-dollar exchange rate. The interlinked quality of these alternate currencies continues to fuel this association.
GBP/USD retreats below 1.3600, US data focus. GBP/USD remains vulnerable under 1.3600, US data in focus.
Futures traders are intently watching important economic data from the U.S., including inflation and employment numbers. Yet their expectations leave them guarded, holding back from making any big trades in the meantime. The wait for macroeconomic data was always important. Ultimately, it has the potential to shape future price action in GBP/USD, given that monetary policy from central banks will play a key role in market direction.
At the same time, the EUR/USD cross continues to hold 1.1550+ range after the release of the German ZEW data. The Euro is doing great, but that strength hasn’t turned around GBP/USD. It still needs to survive those tempest tossed trials.
Market analysts suggest that until traders receive clearer signals from upcoming US data and central bank announcements, GBP/USD is likely to remain in a holding pattern. Equity investors are especially attentive to changes in the economic outlook. They understand that any hawkish or dovish statements made by central banks will ‘leak’ and cause markets to move beforehand.